PalacioHill

I think the key between private and public exchange funds is that private exchange funds are usually structured so that the investor retains some exposure to the potential upside in the stock holding, unlike public exchange funds where you have probably diversified it away. Dont know much more than that because CFAI wasnt really explicit there and didnt find anything when I googled it after taking the 2007 exam

mik82

that's bcoz in private funds you have options to use hedging techniques i guess plus u can always adjust your holdings either increase or decrease and are not required to hold illiquid assets..

Zestt

ok, got that part, but when do you recommend private vs. public if you're only trying to diversify your concentrated position?

mp3bu

Yeah, I just checked the book, mwvt9 was right. Should have known better than to hate on the champ. It says it can be a collection of different securities, but is typically the same security.

susana

CFAI p. 199 seems to indicate only one stock holding unless I am reading it wrong.

strikethree

Black Swan Wrote:
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> My understanding is that the difference between a
> private exchange fund and a public exchange fund
> isn't the type of investments but simply the
> manner in which they are organized.


Yes, that was my understanding as well. I.e. Public can not change investments once contributed to exchange fund while Private you can subsitute investments, etc. but that answer from CFAI, just got me all confused -- we don't need that kind of confusion right now

jmh530

My understanding is that the difference between a private exchange fund and a public exchange fund isn't the type of investments but simply the manner in which they are organized.

Windjam

Black Swan Wrote:
-------------------------------------------------------
> Wait, what? I thought an exchange fund wasn't 20
> people with the same holding, but 20 people with
> various concentrated holdings pooling their
> holdings into a more diversified fund.

You are absolutely correct!

skycfa

That is Q2 from 2007 AM.

thommo77

passthismofo Wrote:
-------------------------------------------------------
> mwvt9 could you please comment on why the 2007 AM
> guideline answer is specific about Private
> Exchange Fund vs. Public Exchange if you have
> seen/done that question?
>
> I am still not clear on why one is better than the
> other from a diversification perspective.
>
> Thanks

I haven't taken this exam, so I can't comment.